George Osborne in introducing his budget said that last year’s budget was ‘about rescuing the nation’s finances, and paying for the mistakes of the past.’ But this one was about reforming the nation’s economy or as he put it ‘on the route from rescue to reform.’
But as predicted in yesterday’s blog the economic conditions did not provide him with a launchpad for anything but a neutral budget.
The Office for Budget Responsibility predicted that the annual growth forecast for 2011 has been revised downwards to 1.7% from 2.1%. and it is this low growth rate that is causing the Chancellor difficulties. But he clutched onto the fig leaf that ‘the OBR point out that the effect, in their words, ’˜creates scope for slightly stronger growth in later years’ than previously forecast.’
But as Ed Milliband was quick to point out the growth target in the UK is predicted downwards for the next three years.
The other problem pinpointed yesterday was the problem on inflation.The OBR now expect inflation to remain between 4 and 5% for most of this year before dropping next year.
And whilst the Bank of England again decided today to not change interest rates by a vote of 6 to 3 this situation is not likeIy to be maintained for to long.
Although the Chancellor again confirmed that the inflation target for the Monetary Policy Committee will remain at 2%, as measured by the Consumer Prices Index. So for a while yet,we can expect many more letters from Merv to George apologising for not meeting this particular target.
On taxation, he said ‘They should be simple to understand and easy to comply with. And our tax system should be fair, reward work, support aspiration and ask the most from those who can most afford it.’
He announced that the Government would consult on merging the operation of National Insurance and Income Tax. But he reassured pensioners that he was not proposing to extend National Insurance to them. ‘Our purpose is not to increase taxes, it is to simplify them.’
But in order to encourage enterprise he announced corporation tax would be reducedby 2%. And that it will continue to fall by 1% in each of the following three years ’“ taking the corporate tax rate right down to 23%.
He promised help to first time buyers in England, ‘So I can announce that ’“ from the proceeds of this year’s bank levy ’“ we will fund a £250 million commitment to first-time buyers.A new shared equity scheme, First Buy, will be available for first-time buyers who want to purchase a newly built property, but who cannot afford the high deposits.’ This will not apply to Wales. But there is already a similar scheme in place and of course there will be an increase in the Welsh budget under the Barnett formula.
He also announced 21 new Enterprise Zones in England, where businesses ‘will get up to 100% discount on rates, new superfast broadband and the potential to use enhanced capital allowances in zones where there is a strong focus on manufacturing.’
As these matters are devolved he will open discussions with the Assembly to see how Wales can similarly benefit from such schemes.
He also confirmed ‘that from April next year the personal tax allowance will increase by a further £630, to £8,105. That’s another real increase of £48 extra per year, or £126 in cash .’
Smokers will again face an increase in tobacco duty. Rates will increase by 2 per cent above inflation.
But like all Chancellor’s he kept back a little nugget for the tail end of his speech. And this year’s special offer was on petrol prices. He cancelled the 4p fuel duty rise that was due and ’ I am today cutting fuel duty by 1 penny per litre.This will take effect in petrol stations from 6pm tonight.’
Cheryl Gillan, the Welsh Secretary flagged up that Wales would receive an additional £65 million as a result of the Budget.